The Top 10 S&P 500 Dividend Stocks for April

by Dan Burrows | April 15, 2014 10:58 am

If there’s an upside to a market selloff, it’s that it causes yields on dividend stocks to rise just when the relative safety of dividend stocks is at its most appealing.

percent weights dividend stock[1]It’s been an unnerving time for investors, especially because there’s no simple explanation for the recent drop in stock prices. True, weakness is being led by riskier sectors like technology and biotech (with momentum plays taking a disproportionate share of the selling), but the damage has spread far and wide.

Heck, even the boring Dow Jones Industrial Average has lost nearly 3% from its early April peak.

At the same time, demand for bonds has caused the yield on the benchmark 10-year Treasury to fall sharply. When stocks peaked on April 2, the yield on the 10-year stood at 2.8%. Today, it’s down to 2.64%.

If the market’s mood has been distinctly risk-off, well, at least that gives a lift to the income side of the equity-income equation.

Happily for new money looking to buy dividend stocks, yields are higher than they were a month ago. (Yields and prices on divided stocks move in opposite directions.)

The S&P 500 has lost about 3.5% since early April. That has the yield sitting at 1.99%, up from 1.92% a month ago. True, the yield on the S&P 500 was much higher a year ago at 2.09%, but there are still plenty of stocks offering surprisingly generous dividends.

To get a sense of what’s out there among high-yield dividend stocks, here are the top 10 S&P 500 dividend stocks for April. (Note: All dividend yields are as of April 14.)

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#10: Teco Energy (TE)

dividend-stocks-dividend-yieldTE Dividend Yield: 5.11%

Teco Energy (TE[3]) first broke into the top S&P 500 dividend stocks in February, but a slide in yield has it poised to be knocked out again soon. Fortunately for shareholders, the reason for the drop in yield is that TE stock is in rally mode, gaining more than 5% over the last month.

Better-than-expected quarterly earnings only added to the optimism on this utility stock, which also offered relatively positive guidance. For the first time in a couple of years, TE stock isn’t lagging the S&P 500. Indeed, for the year-to-date, TE stock is beating the broader market by 4 percentage points.

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#9: Health Care REIT (HCN)

dividend-stocks-dividend-yieldHCN Dividend Yield: 5.15%

Real estate investment trusts (REITs) are required to pay out most of their earnings as dividends in exchange for certain tax benefits, which is why so many of them make lists of top dividend stocks. With a consistently high dividend yield, Health Care REIT (HCN[4]) has become a staple of this list.

HCN enjoys a solid portfolio of senior housing, long-term care and medical office facilities, but an acquisition spree has greatly increased costs. Still, that hasn’t hurt the share performance this year. HCN stock is up 15% for the year-to-date, beating the broader market by a wide margin.

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#8: Pepco Holdings (POM)

dividend-stocks-dividend-yieldPOM Dividend Yield: 5.23%

Pepco Holdings (POM[5]) is another electric and gas utility that throws off a big yield. Rising prices for natural gas and electricity — which move together — have given POM stock a boost. Pepco stock is up 10% since the start of the year.

Pepco beat Wall Street’s fourth-quarter profit estimate, helped by higher electric distribution revenue, and set a full-year target of $1.12 to $1.27 per share. Although gas prices fall with the onset of spring, POM stock derives most of its revenue from electricity, which sees a spike in demand every summer.

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#7: AT&T (T)

dividend-stocks-dividend-yieldT Dividend Yield: 5.23%

Telecommunications are another sector to look at for generous dividend stocks, such as AT&T (T[6]).

The most interesting news out of T stock recently is its ongoing price war with T-Mobile U.S. (TMUS[7]). AT&T said customers can sign up for a 2-gigabyte data plan for $65 per month, down from $80. Adding a second phone lifts the total to $90, down from $105. T-Mobile responded by offering tablet users free data and cheaper hardware. T stock is essentially unchanged so far this year.

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#6: HCP (HCP)

dividend-stocks-dividend-yieldHCP Dividend Yield: 5.42%

HCP (HCP[8]) is another REIT that’s no stranger to the list of top dividend payers. However, a rising share price more than offset a dividend hike to depress the yield from 5.83% a month ago.

It’s hard to get mad at HCP stock for putting up such strong price appreciation. Indeed, HCP is having an excellent year for a big dividend payer, putting up a gain of 12% so far in 2014. Street-beating fourth-quarter earnings — helped by higher revenue, not cost cuts — no doubt gave HCN stock a nice tailwind.

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#5: Transocean (RIG)

dividend-stocks-dividend-yieldRIG Dividend Yield: 5.68%

Oil-and-gas-driller Transocean (RIG[9]) makes the top 10 dividend stocks for a second consecutive month. Unfortunately for anyone holding Transocean stock, the dividend yield climbed this high only because the stock has fallen so far. RIG stock is down a painful 17% for the year-to-date, hurt by stagnant oil prices.

Of course that does afford some opportunity for new money, which can get in on the 5.68% dividend yield — up from 5.29% a month ago — at a discounted valuation. Transocean trades for 9 times forward earnings vs. 16 for the broader market.

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#4: Ensco (ESV)

dividend-stocks-dividend-yieldESV Dividend Yield: 6.17%

Ensco (ESV[10]), a U.K.-based oil and gas exploration company, maintains a place on the top 10 S&P 500 dividend stocks for a fourth consecutive month, helped by a sagging share price.

Despite its prominence in the industry, ESV stock is having an awful year. It’s off more than 11% for the year-to-date and can’t expect much help from higher oil prices anytime soon. The drop in the stock pushed the dividend yield above 6% from 5.78% a month ago. As long as the outlook for energy-price gains remains muted, it’s hard to imagine ESV seeing much strength.

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#3: CenturyLink (CTL)

dividend-stocks-dividend-yieldCTL Dividend Yield: 6.48%

And now for the most amusing part of the list. CenturyLink (CTL[11]) is the first of three telecom stocks that always own the top spots for dividend stocks with their crazy-high dividend yields and poor long-term price performance.

That said, things have been looking up for CTL stock lately. Shares are up 6% for the year-to-date, easily outpacing the S&P 500. The upside in price has dropped the yield on CTL below 7%, but given that the stock lost nearly 10% over the last 52 weeks, shareholders probably aren’t complaining.

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#2: Frontier Communications (FTR)

dividend-stocks-dividend-yieldFTR Dividend Yield: 7.37%

Frontier Communications (FTR[12]) is another long-suffering dividend stock putting up hot gains recently on an incrementally better outlook.

Better-than-expected quarterly earnings and progress in its efforts to retain customers and and cut costs have helped FTR stock gain 20% for the year-to-date. Add in the sky-high dividend and FTR has a total return of 22% so far this year — and 44% over the last 52 weeks. Wall Street expects FTR to eke out a slight increase in earnings per share for the full fiscal year.

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#1: Windstream Holdings (WIN)

dividend-stocks-dividend-yieldWIN Dividend Yield: 11.75%

The yield on Windstream Holdings (WIN[13]) is so high it clobbers even the lowest quality junk bond. Like CTL stock and FTR stock, WIN stock is a telecom that has posted some ugly longer-term returns. Lately, though, shares have stabilized, posting a gain of 9% so far this year.

At some point, you figure the good times of amazingly high yields on WIN stock have to come to an end. After all, Windstream is highly leveraged and pays out more in dividends than it makes in earnings. In case you couldn’t tell from the high yield, this is one risky stock.

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As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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  2. Compare Brokers:
  3. TE:
  4. HCN:
  5. POM:
  6. T:
  7. TMUS:
  8. HCP:
  9. RIG:
  10. ESV:
  11. CTL:
  12. FTR:
  13. WIN:
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